April 3, 2019, | AtoZ Markets - Over the last few years, the number of crypto holders that had lost their funds due to the hackers and the crypto exchanges security vulnerabilities has grown. The crypto enthusiasts continue exploring the new ways on how to prevent crypto investment loss.
Proper security measures help to prevent loss of digital funds
Cryptocurrency users have the ability to store an unlimited amount of digital assets inside a free crypto wallet. Proper care of the digital storage and precautionary measures, help to prevent crypto investment loss as the wallet can be accessed only by its owner.
Krypto enthusiasts emphasize that possession of a cryptocurrency has a large number of positive aspects. In addition to providing financial services to people who have never had access to them, the cryptocurrency and the technology that provides it, you can easily and quickly invest money, make free money transfers and quickly and safely carry out transactions. in financial institutions.
Crypto investment loss happens due to crypto jackers
The excitement around the cryptocurrency which started in 2017, encouraged crypto enthusiasts to promote benefits of the digital assets in every media channel. Over time, however, in addition to such words as “decentralized”, “unchanged”, the words “unreliable” appeared in the platforms covering cryptocurrency news. The compliments addressed to cryptocurrencies were often accompanied by a warning about risks- cases of hacking, fraud and money laundering, following the cryptocurrency industry. Nevertheless, many cryptocurrency industry insiders did not pay this warning proper attention, not much attention was paid on how to prevent crypto investment loss. As a result, more and more cases of loss of funds and devastated users and exchanges continue to appear.
QuadrigaCX clients’ fate stays unknown
The most recent vivid example of the loss of a large number of digital funds were the events that occurred on the Canadian cryptocurrency exchange QuadrigaCX. 115,000 users of the exchange were left without access to their funds after the CEO of the exchange, Gerald Cotten, died in December. Cotten supposedly was the only person who knew where the private keys of the exchange are stored.
When QuadrigaCX CEO died, the private keys of the cryptocurrency purses of the exchange were lost, perhaps forever. According to the experts, this outcome was due to the apparent lack of foresight on the part of the exchange and the lack of oversight by the Canadian regulatory authorities. As a result, QuadrigaCX was left without access to most of its assets when Cotten passed away. Earlier this year Atoz Markets covered an article detailing the QuadrigaCX case.
Lost funds might be never compensated
Nevertheless, the QuadrigaCX incident should be viewed not only as an example of unsuccessful management but also as a useful lesson for holders of crypto.
Affected users could avoid losing their savings by taking a simple step, first of all, not to keep their cryptocurrency on the exchange.
If crypto investments are stolen or lost, it is not necessary that a government or any users’ protection agency will compensate these loses. To avoid this here are some methods of how to prevent crypto investment loss.
Ensuring private keys will help to prevent crypto investment loss
The most important factor in ensuring the security of digital funds is the method of storing private keys that give access to the crypto exchange. The safest way is to store private keys in “cold storage”, so they cannot be accessible via the Internet. In the case of “hot storage” private keys can be accessed online.
There are several ways to store coins in cold storage. The easiest and cheapest way is to make a paper wallet. There are several websites that can be used to safely generate random strings of characters that can be used to store cryptocurrencies. After paper wallet is made, it is recommended that to keep several copies of it in safe places. That way, if one copy is lost or otherwise destroyed, the coins will still be available.
Using paper or hardware wallet helps to prevent crypto investment loss
Some experts, although do not recommend creating paper wallets, as they are very difficult to create without the risk of phishing or other theft. It is important to follow some precautions, to avoid that.
- It is cautious that the paper wallets generator used is not a phishing site that might steal private keys.
- It is recommended to use antivirus software.
- If possible, print your paper wallets on a printer that is not connected to the Internet to make sure that any viruses that may be in your printer will not be able to steal your keys.
The second and more expensive option is to store private keys on the hardware. You can purchase an encrypted hard drive or a hardware wallet manufactured specifically for storing cryptocurrency keys. Some of these hardware wallets have the added advantage of regeneration keys — sets of words or phrases that you can use to restore your wallet if you lose access to it.
Cryptocurrency deposits are for large amounts of cryptos
To store a large amount of cryptocurrency, the digital assets holders are using a cryptocurrency deposit service which takes care of their funds. These services use advanced encryption, physical storage, and distributed storage to secure accumulated cryptos. Some of them also offer insurance in case anything happens to your cryptocurrency. However, as for the paper wallet, it is crucial to be absolutely sure about the legitimacy of the cryptocurrency storage service and the protection measures it provides.
Careful examination of the crypto exchanges another measure to protect personal funds
Another important security measure to take is to carefully examine the exchanges and other cryptocurrency platforms that you use before sending your coins into them. One way to make sure that the service you use is legitimate is to find out what the cryptocurrency community says about it. A simple Google search will give you access to the best and worst experiences that people had in a particular cryptocurrency company. Some important things to consider when researching an exchange include:
- Was this platform hacked before? What steps has the platform taken to prevent similar incidents in the future?
- Is this service insured? Is it insured by a government agency or private company?
- What customer service is available?
- Location of the platform? What government regulations protect a user in the event of a hack or other emergency?
- What is the reputation of this platform in the cryptocurrency community?
- How does this platform store its cryptocurrency? Is cold storage available?
- What types of protection are available for the users? Does the platform use two-factor authentication?
- Have there ever been phishing sites of an “imitator” on this platform? What were the addresses of these sites?
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